Denver, New York Seek Online Revenue

Separate attempts by two major school systems to cash in on the
World Wide Web are breaking new ground in raising money while
rekindling criticisms about commercialism in education.

In Denver, education officials recently signed a deal with KickStart.com that will pay the district
a penny every time someone visits special Web "portal" sites for school
information. Add in a fee whenever someone uses a preferred search
engine or buys a product from an online school system mall, and the
70,000-student district could bring in as much as $1 million a year
that would be put back into its online services.

Denver
school officials have signed a deal with KickStart.com to pay the
district whenever visitors use a special Web "portal."

The New York City school board, meanwhile, has
approved in concept a proposal to create its own Internet service and
Web portal that would reap sponsorship fees and commissions from
corporate affiliates. Proponents estimate that the profits could reach
$100 million annually, enough to pay for laptop computers to be given
or sold at a discount to every 8th grader in the 1.1 million-student
system.

Leaders of both school systems say they are securing for schools the
same kinds of revenues that are fueling the growth of commercial online
portals, such as Yahoo! Portals are sites that are designed to be a
jumping-off point for going on the Web, typically offering users news,
search tools, and online shopping, while generating money in the form
of advertising fees and sales commissions.

"We're building a technology business that will generate revenue
that will pay for 21st-century tools," said Irving S. Hamer, a member
of the New York board of education who was on the task force that
drafted the district's plan.

Some national observers say that approach makes sense. "It's smart
to look at the medium for which you need new funding streams and use it
as source for some of the revenue," said Cheryl S. Williams, the
director of the National School Boards Association's Institute for the
Transfer of Technology to Education.

But both plans have critics, who fear that the shadow of commercial
influences over public education is lengthening.

"I know school districts are having budget problems," said Vicki P.
Rafel, the vice president for legislation for the Chicago-based
National PTA. "But in many districts, this may be seen as making money
off their students."

Taking Control

Until now, the main way for districts to make money from commercial
Web sites has been by receiving a commission from online sales
associated with their schools.

Through online "malls" such as schoolpop.com, for example, parents
or other customers can designate a school to receive a portion of the
money they spend. Companies such as ASD.com and Family Education Network run variations of
that model by setting up Web sites for schools with information and
educational resources, in addition to online-shopping
opportunities.

While a growing number of districts have signed up for such sites,
some of those districts have been frustrated by how little money they
have received from them. ("Schools Hope To Cash In On Online
Sales," Dec. 15, 1999.)

"Districts have always given away a lot more than they've gotten,"
said Arnold F. Fege, the president of Public Advocacy for Kids, a
nonprofit consulting group in Annandale, Va.

But district administrators in Denver and New York believe they can
do better.

"Companies wanted to add us to their Web site," said Craig A. Cook,
the chief operating officer of the Denver public schools. "I said [no],
you'll come and build our schools' Web sites," he said.

In March, the Denver school board unanimously approved a contract
with KickStart.com, a small company in nearby Greenwood Village, Colo.,
that sets up portals and online malls. KickStart is currently creating
custom Web portals for district departments, for individual schools,
and for school clubs and teams. Parents and others outside the schools
can visit the portals when they are launched beginning this spring.

The portals will not replace the system's official Web sites, but
will be an alternative way for anyone to access online Internet-search
tools and school information.

Whenever users visit one of the new portals, they will see an array
of school information, from lunch menus to announcements to homework
assignments, as well as district-approved advertisements and links to
the online "DPS Mall," Mr. Cook said.

And here's the revenue part: Simply by the user's visit to any of
the portals, the school or the district will be paid a 1-cent fee,
which is half the revenue KickStart collects from its advertisers. And
whenever a user searches for information using the portal's preferred
search engine—Snap—the schools will earn a penny and a
half. Denver is believed to be the first district to enter such a
revenue arrangement.

Users who purchase merchandise at the DPS Mall, which will include
both national and local merchants recruited by KickStart, can direct
the merchant's commission on the sale to an individual club, school, or
the school system. The company will manage the portal sites, ad sales,
and recordkeeping.

At the option of individual schools, Kickstart will also create an
additional set of penny-generating portals for classroom
use—without the shopping options—that can be the "default"
starting point for school computers.

If the district's expectations are realized, the pennies will add up
to between several hundred thousand dollars and $1 million per year,
Mr. Cook predicted. "Kids do thousands of Internet activities a day,"
he noted.

Mr. Cook and KickStart officials said the contract marks a new level
of parity between a district and a commercial Web company.

"The partnership is equitable," Hughes Bakewell, KickStart's
president and chief executive officer, said. "When we win, you win, and
when you win, we win."

Company officials said they were offering the same deal to other
districts, both large and small.

Mr. Cook acknowledged, though, that Denver will reap an extra
benefit that other districts won't: The contract gave the Denver
schools' foundation the right to buy stock options if the privately
held company goes public. "We're the first major school district to do
this; that's a revenue opportunity that not anybody else is going to
get," he said.

Paying for Laptops?

New York's proposal is even more ambitious. On April 19, the central
school board unanimously endorsed a plan to form a board-owned company
that would offer a Web portal and free Internet service citywide. The
board's final decision will be made after it considers a detailed
business plan due Nov. 13.

Companies would pay fees to become sponsors of the portal rather
than advertising on the site directly. They could also buy licenses to
use a board of education logo in their advertising. In addition,
whenever subscribers to the service used it to visit the sponsors'
online shopping sites—such as an online bookstore—the
district would receive commissions on their purchases.

The New York City schools would enter this business arena for a
different reason: to capitalize on the market value of its vast
community, estimated at more than 4 million students, family members,
and school employees.

If all of them signed up for the board of education's service, it
would be the nation's second-largest, behind America Online, and a
conduit for hundreds of millions of dollars in online purchases, said
task force member Andrew C. Rasiej. He is the president of Making Opportunities for Upgrading Schools
& Education, a nonprofit volunteer group that assists the
city's schools in acquiring technology.

The resulting revenues could pay for—in full or in
part—85,000 laptop computers or Internet devices and e-mail
accounts that would be issued to 8th graders each year.

Mr. Rasiej said the proposal was a way for the school system to
leverage its size and influence to put technology into the grasp of all
its community.

But Mr. Fege said both the Denver and New York plans were troubling.
"I don't think you can neatly draw lines of discrimination here," he
said, "once you have crossed the boundary and begun selling."

He noted that the Denver plan is run by the district's
community-partnership enterprise-activity office, an entrepreneurial
unit that has struck exclusive deals for the district with several
companies, including Pepsi-Cola Co. and US West Inc. Likewise, the deal
with Kickstart would prevent the district from making similar
arrangements with other portal companies.

Ms. Rafel of the National PTA said there was a risk that the
district's academic program might be affected. "We're concerned about
the potential for using class time in less than educational ways," she
said.

As one example of a potentially troublesome area, the Kickstart
portals' preferred search engine, Snap, owned by NBC Internet Inc.,
accepts fees from companies to have their Web sites listed first on
keyword searches, Mr. Cook acknowledged. But users will be able to
choose from other search engines at the portals, he said.

Both city districts say their plans differ from school deals with
Channel One or ZapMe!, which have given schools free televisions and
computers, respectively, in return for requiring students to watch
programming that contains advertising.

"We will prefer that you use our portals," but it is not a
requirement, Mr. Cook said. "We're an educational environment in a
world where the operative word is 'choice.'"

Vol. 19, Issue 35, Pages 1, 15

Published in Print: May 10, 2000, as Denver, New York Seek Online Revenue

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